Rumor has it that a law allowing online poker in the U.S. will be passed sometime in 2013. Those close to the issue have stated that neither party is willing to bring up the issue in Congress before the next election but both parties have dropped their objections to legalized online poker realizing it’s inevitable and a necessary revenue source.  Consequently both the Democrats and Republicans will support the bill once it’s introduced after the next election. The bill will likely be a federal amendment to the UIGEA that specifically carves out an exemption for online poker similar to fantasy sports and lotteries. The bill is expected to then pass through all levels of government with few objections.

Reasoning: There were 4 issues that were roadblocks to a law being passed but all have been solved or should be settled in the near future.  The first roadblock was competition. While Caesars and a few smaller casinos wanted the change to the federal law, they also wanted to ensure they wouldn’t go in at a disadvantage. The number of U.S. players at Full Tilt and PokerStars was worrisome and became more concerning when Wynn and Station teamed up with the 2 online giants in January of 2011 to offer the product in Nevada. That issue was quickly resolved on Black Friday when the FBI effectively shut down Full Tilt and Cereus and ensured that PokerStars cut off all American players. With the 3 largest U.S. targeted sites out of the way, American player’s choices became far more limited which is precisely what the government and the casinos wanted.

The second issue related to the Native tribes. The Tribal Alliance of Sovereign Indian Nations led by the Morongo Tribe were strongly opposed to any online bill until last year but the Natives are now becoming more open to the idea. The California Nations Indian Gaming Association (CNIGA), representing 29 casino and non-casino tribes. have now indicated they are in support of a poker bill and in fact are preparing to offer a free online poker site to test the waters. While it’s uncertain what agreements were worked out between the California government and the Indian nations there is no dispute that the language from the Natives has become more conciliatory. It’s also notable that the natives were worried that an online poker bill would make them uncompetitive with offshore sites, but the closing of Full Tilt, PokerStars and Cereus to U.S. customers as was mentioned previously has certainly alleviated those fears.

The third issue relates to state’s rights. California, Nevada, Iowa, Florida, New Jersey and any other states that are interested in online poker all have different ideas of how to offer the product. California, for example wants any site, American based or not, to be given permission to apply for a license while Nevada wants to ensure that only Nevada casinos or their partners are offered licenses. Similarly New Jersey is looking for online poker to be operated by existing Atlantic City casinos. The states also have different ideas on how to tax and regulate the product. The issue has caused a lot of tension between the feds and the states who all have threatened to make the move with or without federal approval only to back down, while the federal government is insistent that online gambling is interstate by nature and hence a federal issue. Sources have stated that the antagonism has begun to wane and the federal and state governments are now working in unison towards a common goal. The belief is that the federal government will pass the amendment to the UIGEA and have certain rules that apply to all states, but the states will actually run the gambling and provide a kickback to the feds for enforcement. Any state that doesn’t want to be a part of online poker legislation (like Utah) will be exempt from any law and filters will have to be put in place to block citizens from those states from playing.

The last issue relates to taxation and regulations behind any poker law. Joe Barton’s recently introduced Poker Act of 2011 may have a lot of support but it may not be realistic. The number of rules will be quite a turnoff to many players and some of the rules, such as those relating to bots, may be unenforceable.  Moreover to prohibit non U.S. based casinos, poker rooms or race tracks from offering the product for 2 years could easily run in to some global challenges. It was easy for the USTR to violate WTO rules by picking on Antigua but the EU is another kettle of fish altogether. It was already decided with the Antigua case, that the U.S. is in violation of WTO agreements but they got off with the inane morals argument. However, to offer a product in the U.S. and then announce that all non U.S. companies are not eligible to offer the same product violates every known free trade agreement and will never hold up in international courts. In fact Betfair is already in the U.S. with their TVG product and Bet365, 888 Gaming, William Hill and others are preparing to set up U.S. offices with the expectation of being allowed to offer their poker product as soon as the bill is introduced. No doubt those companies will team up with existing casinos if necessary but undoubtedly will have their lawyers ready to start an injunction against banning them from offering the product.

As for the taxation and fee issue, the specifics are still uncertain. Jim McDermott’s plan to charge 2% of all deposits as a licensing fee and tax and then require all customer play would be tracked and taxed will never fly. If customers are treated differently online than they are at a land based casino it’s unlikely they will play ball. Instead they’ll still flock to the offshore sites that are available to them like Cake poker or Bodog.

In any case the states and feds have almost 2 years to iron out all the details but look for online legislation to happen by then.